Philadelphia Federal Reserve President Says US Colleges May Become Extinct

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By Jacob Maslow

female graduateFor the longest time, a college education has been viewed as the gateway to the American dream. If you wanted upward mobility for yourself and your family, you needed to get a college degree. There are a lot of statistics to back up this long-held idea. The fact remains that the income gap between a high school graduate and a college graduate in the United States continues to grow with time. Moreover, even though there’s a current glut of college degree holders looking for a job, this is a temporary situation. In fact, if you’re going to look at the overall US jobless statistics, the share of job-seekers with a college degree is much lower than those with a high school diploma or no diploma at all.

With that said, the conversation then turns to how much it costs to get that college degree. A lot of digital ink has been spilled to discuss the fact that the cost of attending college or university in the United States has skyrocketed way past the rate of inflation. In fact, the average amount of student debt of the typical college degree holder has reached alarming levels. Many analysts have even blamed this as a part of the weakness of the general US economy. Less and less college graduates are buying homes because of the huge amount of college and post-graduate debt that they hold.

With all this as a background, it is very interesting to note the recent remarks of Philadelphia Fed incoming president, Patrick Harker. According to Mr. Harker, who’s also the Head of the University of Delaware, American institutions of higher education are increasingly pricing themselves out of the financial capabilities of the middle class. He even went on to venture that this may lead to the extinction of colleges and universities in the United States. He raises the fact that the average in-state cost for colleges and universities is around $27,900 while the out-of-state costs are around $40,000. He is saying that US colleges and universities have to utilize properly their mix of non-tenured and tenured instructors and professors as well as mixing in technology to produce more value for every dollar spent. Keep in mind that his analysis doesn’t really factor in the huge amount of government subsidies that go into both private and state institutions.

All told, the American higher education industry is in serious trouble. There are hundreds upon hundreds of private and state colleges in the United States and if their costs continue to skyrocket, there will be tremendous demand pressures on the lower end which may force closure of less competitive schools. I’m seriously convinced that this would leave everybody else worse off.

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